Question 1

Section A

EventPro is organizing an outdoor music festival. The profit depends heavily on the weather. 
Profits:
Good weather (Probability 0.4): $100,000
Average weather (Probability 0.5): $40,000
Poor weather (Probability 0.1): -$20,000 (Loss)

What is the Expected Value (EV) of the profit for the festival?

Accepted Answer

Multiply each outcome by its probability and sum the results. Remember to subtract the loss.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Adding the $2,000 instead of subtracting it because it is a loss.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA PM — Performance Management Practice Exam 3

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